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Utility in WTP Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps

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Author Info
Ricardo Scarpa () (University of Waikato)
Mara Thiene () (University of Padua Viale dell’Universita`)
Kenneth Train () (University of California at Berkeley)

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Abstract

Destination choice models with individual-specific taste variation have become the presumptive analytical approach in applied nonmarket valuation. Under the usual specification, tastes are represented by coefficients of site attributes that enter utility, and the distribution of these coefficients is estimated. The distribution of willingness-to-pay (WTP) for site attributes is then derived from the estimated distribution of coefficients. Though conceptually appealing this procedure often results in untenable distributions of willingness to pay. An alternative procedure is to estimate the distribution of willingness to pay directly, through a re-parameterization of the model. We compare hierarchical Bayes and maximum simulated likelihood estimates under both approaches, using data on site choice in the Alps. We find that models parameterized in terms of WTP provide more reasonable estimates for the distribution of WTP, and also fit the data better than models parameterized in terms of attribute coefficients. This approach to parameterizing utility is hence deemed promising for applied nonmarket valuation.

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File URL: ftp://mngt.waikato.ac.nz/RePEc/wai/econwp/0615.pdf
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Paper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 06/15.

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Length: 23 pages
Date of creation: 15 Dec 2006
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Handle: RePEc:wai:econwp:06/15

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Related research
Keywords: mixed logit random utility parameters random willingness to pay travel cost method destination choice modeling

Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Herriges, Joseph A & Phaneuf, Daniel J, 2002. " Inducing Patterns of Correlation and Substitution in Repeated Logit Models of Recreation Demand," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 84(4), pages 1076-90, November. [Downloadable!] (restricted)
  2. Herriges, Joseph & Phaneuf, Daniel, 2002. "Inducing Patterns Correlation and Substitution in Repeated Logit Model of Recreation Demand," Staff General Research Papers 5035, Iowa State University, Department of Economics.
  3. Trudy Ann Cameron & Michelle D. James, 1986. "Efficient Estimation Methods for "Closed-Ended" Contingent Valuation Surveys," UCLA Economics Working Papers 404, UCLA Department of Economics. [Downloadable!]
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  4. Riccardo Scarpa & Mara Thiene, 2004. "Destination Choice Models for Rock Climbing in the Northeast Alps: A Latent-Class Approach Based on Intensity of Participation," Working Papers 2004.131, Fondazione Eni Enrico Mattei. [Downloadable!]
  5. Erik Meijer & Jan Rouwendal, 2006. "Measuring welfare effects in models with random coefficients," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(2), pages 227-244. [Downloadable!]
    Other versions:
  6. McCulloch, Robert & Rossi, Peter E., 1994. "An exact likelihood analysis of the multinomial probit model," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 207-240. [Downloadable!] (restricted)
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  8. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, September. [Downloadable!]
  9. Edward Morey & Kathleen Greer Rossmann, 2003. "Using Stated-Preference Questions to Investigate Variations in Willingness to Pay for Preserving Marble Monuments: Classic Heterogeneity, Random Parameters, and Mixture Models," Journal of Cultural Economics, Springer, vol. 27(3), pages 215-229, November. [Downloadable!] (restricted)
  10. Cameron, Trudy Ann, 1988. "A new paradigm for valuing non-market goods using referendum data: Maximum likelihood estimation by censored logistic regression," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 355-379, September. [Downloadable!] (restricted)
  11. Kling, Catherine L. & Bockstael, Nancy & Michael, W., 2005. "Estimating the Value of Water Quality Improvements in a Recreational Demand Framework," Staff General Research Papers 12334, Iowa State University, Department of Economics.
  12. David F. Layton & Gardner Brown, 2000. "Heterogeneous Preferences Regarding Global Climate Change," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 616-624, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ricardo Scarpa & Mara Thiene & Francesco Marangon, 2007. "The Value of Collective Reputation for Environmentally Friendly Production Methods: The Case of Val di Gresta," Working Papers in Economics 07/11, University of Waikato, Department of Economics. [Downloadable!]
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